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markass530 writes "An iPhone insurance carrier says that four in six claims are suspicious, and is worse when a new model appears on the market. 'Supercover Insurance is alleging that many iPhone owners are deliberately smashing their devices and filing false claims in order to upgrade to the latest model. The gadget insurance company told Sky News Sunday that it saw a 50-percent rise in claims during the month Apple launched the latest version, the iPhone 3GS.'"

It's no different. Intentionally damaging your phone and then submitting a fraudulent claim is illegal; it's insurance fraud and an old swindle.

There may be some legitimate reasons for claims to rise in the period just after a new model is introduced; e.g., some people tolerate hardware flakiness until there's a good reason to bother with the pain of upgrading. With my sample size of 1 (me), the scroll ball on my BlackBerry refuses to go up sometimes (maybe about 0.1% of the time), but I can wait until m

I also wonder: how many people have malfunctioning cellphones that should be replaced under either warranty or insurance, but are tired of arguing with the warranty or insurance companies -- so they physically destroy the device, and then there's no argument about whether or not it is in need of replacement.

Amen. I've got an iPhone 3G which is running slower and slower, even after restoring to factory defaults. It's a known problem too, judging by the number of people posting in the forums. Of course, when you call with your complaint, you'll enter a useless road of drones that ask you to restore it, contradict you and say nothing's wrong, threaten you that sending in your device will take two months, etc. etc. I can see why people would get frustrated and upset and eventually kill the POS.

The day I bought my phone (3G S) the sales person in Best Buy was trying to sell me an extended warranty. They were telling me how they covered everything under the sun and I should just buy it.

Right next to me, someone was bringing in a broken 3G and trying to get a 3G S warranty replacement and they told him to go screw himself, and that the warranty didn't really cover much of anything at all.

I turned to the sales person, pointed to the conversation right next to me, and said "that's why I'm not buying the warranty. I know you're full of shit."

Do people lie to abuse the system? Sure. Do they lie when selling the warranties? Yes.

Risk pooling only makes sense if there is a small chance of a very high cost event happening.

My phone stopped working so I have to buy a new one doesn't cut it.

Someone rear ended me at a red light and now I have a $70,000 hospital bill does.

I agree that it's not fraud, but it's an underhanded way of increasing the profit on a sale. It's like playing the gambling - it's a task on people who don't understand statistics. Unlike gambling, I've never heard someone call buying insurance "fun."

It isn't fraud...The only time it's fraud, is when the store sells an extended warranty that is so limited by its terms as to be entirely useless.

By your very own definition what the GGP and GP were describing IS fraud. The kid has basically been trained to lie about the product, implying it covers everything when he in fact knows that it basically covers nothing. So it's fraud on two counts, by the product being largely useless and the sales person misrepresenting the product. This type of thing happens all the time at Buy More...err...Best Buy and the like.

And I saw a bull SERVICING a cow the other day, too. The fraud is in the misrepresentation of the risk/benefit of being part of the "risk pool". In short, if you buy the insurance every time, you lose in the long run unless a ridiculously high number of products which you buy fail. If you don't get the insurance, then you win overall unless, again, a ridiculously high number of products which you buy fail. Salesmen prey on the fact that people, as a whole, are demonstrab

Supercover says that these false claims are usually quite easy to spot.

It said: "iPhones, like most mobile phones, are actually very difficult to damage.

Or to paraphrase, "We sell insurance at rates that would allow us to replace 1/2 of the customers' phones even though the actuarial tables say only 1/20 should actually have the need. Thank goodness we can arbitrarily deny a claim."

I don't see why this post is modded down as Flamebait. It seems like a perfectly reasonable question. Are we supposed to assume that Apple customers are more honest than average folk and therefore express surprise that they, of all people, would commit fraud? This doesn't seem like a story unique to iPhones or Apple so I wonder why it's framed as such.

than any other cell phone? i know more than a few people who have done this with more than a few different brands of phone.

I'll chop on this.

It is different because the iPhone is a status symbol first and a phone second. Thus when a new model comes out the primary function of owning an iPhone (status) is eliminated leaving you merely with a phone (gasp). In order to retain the primary reason for owning an iPhone, customers must either buy a new phone more frequently than their contract allows them to (huge cost) or commit fraud (which is what seems to be the choice people are making).

And yes, I'm not an Apple fan. I have a love-hate relationship with Apple users. I hate them and they love themselves.

My iPhone isn't a status symbol. It's a tool. I don't own any status symbols - I drive a beaten up car, have no branded clothes, wear a non-brand watch. You get the idea.

The primary function of the iPhone is most certainly not a status symbol to the vast majority of people who use it.

The practice has been going on in the cell phone market for *years* - long, long, long before the iPhone was released. It's not a new phenomenon, and it can be entirely attributed to "new is better than old" for whatever phone it is. It's one of the reasons the guy in the O2 shop thought it was unusual that I had a phone that was over 5 years old before I bought an iPhone, since most people upgrade the *second* their contract allows them to, or they resort to damaging the phone on purpose and claim on the warranty.

almost none compete with the simplicity, the ease of use, the consistency and reliability (software) and featureset of the iPhone.

I'm surprised you included "featureset" in there, because that's the one where the iPhone is objectively worse than its competition.

One could argue over whether or not the iPhone is really any easier to use than Android, for instance, but there's no denying that Android does more: turn by turn nagivation, widgets, and background apps are pretty major features that the iPhone is lacking. Now that Android has multitouch, does the iPhone even have any exclusive features?

Apple doesn't have the only app store for smartphones. Just the only one that places such bizarre restrictions on developers, and the only one that users can't get around by downloading apps from somewhere else (unless they want to jailbreak, which Apple contends is illegal).

My iPhone replaced a much-higher-specced, 5-year-old phone that did jack diddly shit when you got right down to it. [...] I've had my iPhone for 2 years, and it's invaluable to me.

Yes, the iPhone is better than most smartphones from early 2008 (and certainly better than the ones from 2003). But nothing you mentioned sets the iPhone apart from the other smartphones you can buy today: not the app store, not the music player, not the headphone connection, not the control schemes, not the software, not the screen, not the reliability, not even the looks. The only thing that sets it apart anymore is the cachet that comes from having a picture of an apple on it.

I could make all the same arguments to you about Linux (except about it being a status symbol because the UI looks like garbage), since it can't do anything useful like run the apps I personally need, therefore it must be of no value whatsoever.

Just because it does not fit your needs does not make it a "flashy, useless, pointless" item.

What other option for a smartphone would you suggest for a Mac OS X user around the time of the iPhone 3G? Bl

'Then if I was the insurance company, i'd be supplying like-for-like, and not an upgraded model"

Most insurance companies do offer that. If you smash your 1995 Lexus they don't buy you a 2010 Lexus. Is this insurance company dumb enough to be giving these people brand new models? If so, do they offer car insurance?

FTA:"Korina said that one device was even dropped on the pavement and then run over by a car."

Wow a phone that was dropped and run over?? Geez that's very suspicious! It's physically impossible to run over a phone with a vehicle...

I can't tell you how many times a salesperson has pushed "breakage insurance" on me using examples like this as a sales pitch.

"If it breaks within two years, it gets replaced, and if they can't replace it they refund the purchase price! Then you can just buy the latest model. Heck, half the time they just send you the newest version anyway! You can't lose!"

People want to get what they paid for. Insurance companies phrase it as "keeping costs under control by spotting fraud," but half the time the fraud was hinted at in the sale. But of course you don't have that in writing, you can't prove anything, and you certainly can't afford a lawyer better than the ones they have on retainer...

It is hard to convince myself that insurance is just another valid capitalist approach to make a profit when they always adopt a (sometimes) rebuttable presumption that you are just pulling a scam. Yeah, scams exist, but if I'm paying you to insure my stuff I expect something resembling real customer service, thanks.

There is a more or less fundamental problem with insurance, that is ever pushing against your ever getting customer service(which is a pity; because insurance can theoretically serve a very useful function).

When you buy insurance(either with a lump sum payment at point of sale, or with monthly premiums), the insurer is already as well off as they will ever be, with respect to you. Up until that moment, you were a customer now you are just a cost center. Now, in the real world, regardless of legal obligations, appeals to ethics, or fancy economic analysis from the IT department claiming that they actually save the company money, cost centers have a way of getting the bare minimum, and that grudgingly.

In a theoretical highly competitive(and ideally liquid) insurance market(and, of course, assuming near-perfect information), competition would help keep this in check. If you didn't treat your cost centers well enough, you'd have fewer customers in the future. Unfortunately, gadget insurance isn't all that competitive or liquid(it is generally bundled by the seller at the point of sale, and the primary competitor is "no insurance at all" rather than a selection of other insurance options, and it is generally either a lump sum or part of a carrier contract, so you can't really switch providers).

The ability to pool risk is really nice. However, the "customer/cost center" problem largely ensures that the insurance experience will be shit. They already have your money, you just have a conditional-IOU, and every dollar they can weasel out of is a dollar they get to keep.

If I go to a store and hand over some money to buy a product, at that point I stopped being a customer and now a cost center until I am given the product I paid for (a few seconds later). How is this example different other than timing?

If you go into a store, give them money for a product, and they start treating you poorly, you can demand your money back and walk out. You can't do that with an insurance company, specifically because of the timing.

SupercoverInsurance IS the competition to the insurance pushed by the sales guy.

They claim 48 hour claim processing. Which is just the time it takes them to go "oh, you want to claim".They ask you to send your phone back with a bank note sized piece of bubblewrap - like the postal service isn't going to damage the phone with that little packing.

Their policy does cover malicious damage though - so its not like they're not aware that people will deliberately damage stuff. (covers accidental, liquid, maliciou

There is a more or less fundamental problem with insurance, that is ever pushing against your ever getting customer service(which is a pity; because insurance can theoretically serve a very useful function).

When you buy insurance(either with a lump sum payment at point of sale, or with monthly premiums), the insurer is already as well off as they will ever be, with respect to you. Up until that moment, you were a customer now you are just a cost center. Now, in the real world, regardless of legal obligations, appeals to ethics, or fancy economic analysis from the IT department claiming that they actually save the company money, cost centers have a way of getting the bare minimum, and that grudgingly.

Insurance companies figured out hundreds of years ago that they needed to make sure the insurer had a definite self-interest in the preservation of the asset being insured. If not, I could take out insurance on someone else's ship and sink it, pocketing the full payout. Likewise, I would have no incentive to preserve a ship if it were a leaky wreck when I bought it and my intention was all along to sink it for the insurance money. Things become murkier for the investigator when I did indeed buy the ship for a legitimate business and circumstances turned against me. I could then try to sink the ship for the insurance money if I'd make more on the payout than selling it.

I think gadget insurance is pretty crazy to begin with. Insuring cars, yes, especially gap insurance. Nothing sucks more than crashing a two year old car and realizing you have to finish off payments for it plus the replacement. Insuring your house makes sense. And few people are going to burn down a house with all the valuables inside just for the payout. But an interesting point for fraud investigators, if someone is claiming the house as a primary domicile and it burns down without valuables and irreplaceable personal possessions inside, that's a big warning sign for fraud.

The sad thing is that you may have to buy insurance on products these days simply because they're made so poorly. Among coworkers and friends, there are so many stories of netbooks and laptops crapping out, especially HP's. If a $400 device won't even last you a year, maybe you should buy the insurance. You're going to need it.

I'm wondering if maybe a better model might not be leasing the equipment instead. You subscribe to the iphone, send the old one back when the new model comes out. I wouldn't feel so bad about it if they could properly break these things down into constituent molecules and recycle. It just feels awful to chuck expensive electronics every other year. It feels like sin.

Insurance companies figured out hundreds of years ago that they needed to make sure the insurer had a definite self-interest in the preservation of the asset being insured. If not, I could take out insurance on someone else's ship and sink it, pocketing the full payout.

Until AIG figured out it could make money coming and going by insuring other peoples assets - if they actually had to pay out the government would save them.

think gadget insurance is pretty crazy to begin with.

Gadget insurance is idiotic. The only people who carry it either (a) can't take care of their shit, or (b) intend to defraud the insurer. Because of this the premium/deductable schedule is such that you only win if you file a claim every three months - at which point the insurance company decides you're trying to defraud them and your denied coverage - and you lose any way.

especially gap insurance

Gap insurance only makes sense because a lot of people are idiots and will carry it even after they car is worth more than the loan. If you cancel it as soon as the blue book value matches yoru loan balance (usually ~12-18 months) you bought a useful service.

As for extended warranties - don't buy them. Not on cars, not on electronics, not on anything. Your laptop or your car is either going to break in the first six months and be covered, or isn't going to break until after the extended warranty is up. Even if it does break in the sweet spot, odds are what you paid for warranty coverage is about what it costs to fix your problem.

I'm wondering if maybe a better model might not be leasing the equipment instead.

What's the difference between a subsidized product with a contract and a lease? Not much. The cell phone market is functionally a leasers market today, the only difference is that the asset has nearly completely depreciated (at least as far as resale is concerned) in the lease term.

Arguably, buying insurance because devices are uniformly shoddy is a terrible strategy.

Since the insurer needs to make at least enough money to eat and keep their lights on, the cost of insurance for a device is always going to be(at least slightly) higher than the average cost of device replacement across the insurer's customer base.

In situations where failure is quite rare; but quite expensive, paying the premium is generally sensible. If the devices are cheap; but fail often, it makes a lot less sense. Cost of insurance is always greater than average cost of failure across the insured population and, with highly unreliable devices, your personal risk of failure is increasingly close to that of the average risk.

For gadgets specifically, there is arguably one exception to the above rule: 1st party warranties. It is still the case that the company doesn't want to lose money, on average, by offering warranties, so the cost of warranty coverage will be slightly greater than the average cost of failure under warranty; but there are a couple of ancillary advantages that can make up for it. First, 1st party warranties are good if you simply must have large numbers of identical machines. For consumer purposes, getting model N+1 when model N breaks is a bonus. For corporate and institutional purposes, that would basically be useless, because of administration costs. So, having a first party warranty that assures repair or replacement of model N is valuable. Second, 1st party warranties help align the incentives of the buyer and the seller:

If Dell is selling me "a computer", their only incentive to make sure that it is long lasting is the possibility that I'll get pissed when it breaks and buy an HP instead next time. If Dell is selling me "A computer, guaranteed for 5 years", they have an incentive to chose better components(since providing warranty replacements also has Fedex, call center, inventory, and refurb costs, there is suddenly a financial incentive for them to spend the bit extra on capacitors that won't leak, or better engineering, or whatever.) Since device failure sucks for the customer as well, having a warranty helps align both parties interests.

3rd party warranty/insurance outfits, though, don't have any control over production quality, so they don't have this effect.

Or they can bitch about you to/., that's my favorite customer service! "Most iPhone owners with our insurance are LIARS!" Gee supercoverinsurance.com [supercoverinsurance.com], let me get my iPhone insured through you so you can call me a liar too.

Before I had an iPhone (which At&t does not offer insurance for [about.com]), I had insurance on each smartphone I bought. It was ~$5 a month and a $50 deductible, and they only replaced

And often less. I took out that insurance a few years ago when I had a (then new and hot) Razr, which was stolen within two months. Six months later the replacement fell in the toilet, and they replaced it -- and cancelled the insurance on me.

I haven't insured a phone since. Nor have I bought the latest and greatest $600 phone; I paid $100 (no contract) for my i776, which is about what a year's insurance cost for the Razr. Hot and sleek? No, but it will call, text, email, get on the internet. It's good enough.

I'd like an iPhone, but I no longer think an expensive phone is practical.

i have insurance for ALL device on my person carte of a rider on my homeowners insurance. There's a $100 deductible (per incident, not per device), and it covers loss, theft, accidental, and incidental damage. It covers me, my wife, anything in our cars, and anything a 3rd party has on them while they're with us so long as they're "staying with us" for the night. (for example, and this was the specific example they gave: my parents come to stay for the holidays, and we go out to dinner. While out, seeing a movie, my car is broken into and Dad's camera and laptop are stolen. HIS stuff is covered by my insurance. Same goes if we're mugged. If I drop his DSLR trying to take a picture, also covered).

It costs me about $45 a year for this rider on my policy. it has a $10,000 per incident coverage, and $25,000 annual maximum. (default is much less, but I'll regularly travel with 2 laptops, a media device, a few phones, and several cameras, so i could easily have 10K worth of gear in my car).

This is an extension of the electronics rider on the policy, which bumped my home electronics coverage from $5k to 25K of covered items, which itself cost about $14 a year more, and I added the accidental/incidental clause for a bit more. (note to all you with homeowners insurance, the default electronics and appliance coverage likely does not even cover your fridge, washer, dryer, water heater, AC, heater, etc, let alone your TV, stereo, computers, devices, and more. Without this rider, those each need to be itemized with your insurer, or if you burn down or take a bad lightning strike, you'll be left holding the bag for the difference! Talk to your insurer and make you everything is not only covered, but covered for COMPERABLE OR BETTER REPLACEMENT, most only covers depreciated value, which is worthless! Talk to your insurer and make sure you have an electronics rider!!!)

I buy warranties on most devices, and always pay for at least $10 of the device using my Visa card as well (even when financed otherwise), so I get the additional 1 year warranty extension from them. However, the additional coverage for loss and damage is WELL worth it. I regularly get devices replaced within the 3-5 year terms. In fact, I've not bought a printer/fax in nearly 10 years thanks to BestBuy, but i get a new one about every 18-24 months and buy a new $29 warranty on it.

I've had 2 cases where I used the insurance. One time I was bumped at a trade show, and destroyed a several hundred dollar lens on my camera, filed a report and had the cash in a few days. The other time, my was a car wreck that destroyed a laptop. I've never used it for "malicious" purposes, but I did get IN WRITING from my provider that I was in fact covered for "fits of anger" though i was cautioned that frequent use of that clause could get my insurance dropped. However, since I'm using home insurance on 2 houses, 2 cars, multiple rider policies, and some additional coverage, all from the same company, odds are the near $3500 a year I pay them is keeping them happy enough to replace a few minor devices if I chose to.

"I buy warranties on most devices, and always pay for at least $10 of the device using my Visa card as well (even when financed otherwise), so I get the additional 1 year warranty extension from them."
Whenever I've had to make a claim on my Visa for extended warranty protection (Harmony remote, laptop, external HDD) they require that you pay in FULL with the credit card. On one item I had used a $25 gift card plus my Visa and they almost didn't cover any of it. I had to prove to them that the $25 card was from Visa reward point redemption. After that they deducted the gift card amount from the total reimbursible expense.
I don't see your $10 rule working unless you have a special Visa card that most people don't have access to. I now make a point to not use gift cards for expensive items that may need replaced. Better to use them for consumables or media.

Interestingly, it also specifically excluded laptops with obvious hammer-blow damage, even if I could prove somehow that the hammer blows were accidental.

Though it didn't specifically exclude other types of easy-to-inflict intentional damage (run through the dish washer, thrown out the window, shot with a gun, etc.) though it of course excludes all intentional and otherwise not-accidental damage.

There's dishonesty to be sure, but one wonders why Apple didn't just provide the insurance themselves? Because they anticipated that this shiznit would happen and didn't want to be responsible, or afraid of coming out with another whizbang model.

It can be very hard to tell whether a specific claim is fraud or not, yet easy to tell approximately how many fraud claims there are. A dramatic rise in claims when a new model is released would be a clue. Of course, that's not a complete indicator -- there are certainly some of those claims where people had a minor problem and weren't willing to deal with the hassle of getting the phone replaced, but were once a new model was available and they could upgrade at the same time. But, in general, the insurance actuaries are smart -- they're probably in the right ballpark about how much fraud there is, even if they can't always tell which claims are fraudulent.

(Of course, they're also motivated to have the numbers come out a certain way. But IMHO that's more likely to distort them somewhat than it is to mean they were completely fabricated.)

What, you think that insurance companies pay out? The way insurance companies profit is to take your money and then find excuses to deny the coverage that we've promised. It's like casinos-- they don't make money by letting you win.

These are Apple customers! Did you hear me? APPLE customers! Not some common Samsung owner on the street. They are Steve Job's chosen people!!! Don't you understand? How dare you insult them! It's a conspiracy! Anti-Appleism!!! We must strike a blow for freedom of religion! Quick, smite him!!!! I said SMITE the heathen now!!!! May you burn in IBM hell sir, and may all your phones be Nokias!!!!

What is not covered, section 2 of the policy:2. Loss or damage caused by:
you deliberately damaging or neglecting the electronic equipment;
you not following the manufacturer’s instructions;
routine servicing, inspection, maintenance or cleaning;
the use of accessories.

If you smash it with a hammer and represent that it was an accident, to collect, you have committed fraud.

Then the smart thing to do is to buy up a bunch of 'older' phones and give them to the poor customers that accidentally attacked their phones with a hammer. Typically in an insurance situation, you don't get upgrades, you get a replacement for what you currently have.

I don't see why* editors can't check the link. If it is a blog, check for the source news article, and link that instead. If someone feels their blog adds so much more to the story, they can post a comment here and people can decide for themselves.

*In a practical sense; I realize the kdawson type of complaints are likely to apply here.

Seriously...duh? this is news to someone? Although in the US I've never seen cell phone replacement insurance that would do ANYTHING other than give you a refurbished ones of the exact same model. I've never heard of anyone being "upgraded".

I had a flip-phone model. Had it die on me (internal speaker died, would only work in speakerphone mode). Called in my warranty, got the "replacement"... it's a SLIDE-phone instead of flip (meaning the screen is unprotected).

Called them up, turns out they have a clause in the contract to ship back whatever the fuck phone it is they can with "similar features" if yours is out of production... and the lines go "out of production" every 6 months.

Where do they make the money? Constantly changing accessories. Car charger? Bam. No good. Extra house charger I kept at work? Bam. No good. Belt clip? Bam, no good. Thank god I hadn't bought the "proprietary" handsfree set too.

$100 worth of accessories, down the tube, "not covered" simply because they ship a different model phone incompatible with the accessories you bought right along with the damn phone in the first place.

I don't have phone insurance, but I have insured my bicycle since I use it every day. The bike is insured for the cost of a new bike, plus new accessories (lights, mudguards, rear rack), and new locks. Surprisingly, it's cheaper to insure a £650 bike -- which is expected to be regularly left unattended in the street -- than a £200 phone. Since most claims for a damaged or stolen bike would require evidence from the police (theft/crash report) it's

And of course every time there's a new phone model, there's a new fucking adapter jack to make sure your old chargers don't work.

They sell you the phone, they sell you the insurance, they give you a "package deal" on accessories, and NEVER do they mention that out of all the stuff you just purchased in a single lump, the only thing the insurance is covering is the phone itself, even if THEY choose to replace it with a different model and outmode all

Well I had a motorola flip phone with a stainless exterior, that was no longer made and got 'Upgraded', by Verizon to a camera flip phone. Which was a POS and I went through 6 refurbs in 6 months before I got a prepaid T-Mobile phone and waited the 3 months before I could port my Verizon phone without penalties.

There's not exactly any shortage of refurbished iphone at the time new models come out. Honestly, I think this entire story is bullshit, this company is trying to get viral marketing to sell a lot more policies.

I upgraded to the new 3GS. A few weeks later I was out rock climbing. While being lowered down, my wallet and phone decided to simultaneously vacate their respective pockets. The wallet was fine, but the phone's screen took a beating. Thankfully the cost I had to pay with my AMEX was equal to the cost of the repair, and AMEX covered it. Of course, I've gotten fed up enough with how Apple deals with the unlocking / tethering / app store details that when I'm done with this term, I'm going somewhere else.

I upgraded to the new 3GS. A few weeks later I was out rock climbing. While being lowered down, my wallet and phone decided to simultaneously vacate their respective pockets. The wallet was fine, but the phone's screen took a beating. Thankfully the cost I had to pay with my AMEX was equal to the cost of the repair, and AMEX covered it. Of course, I've gotten fed up enough with how Apple deals with the unlocking / tethering / app store details that when I'm done with this term, I'm going somewhere else.

There, now/. has another comment everyone can read and think, "Who cares?"

No, the reaction will be mostly: "An iPhone dropped off a cliff, oh you poor bastard.../hug "

never bought anything from there but years ago when accidental damage insurance first came out the sales people would tell me how awesome it was because you could throw the laptop out of the window and you would get the latest new one

Users smashing their phone to scam AT&T or smashing their phone because they are stuck using AT&T's "3G" service and finally snap after spending 20 minutes trying to get that informative webpage they need *right now* to load?

But let's get real. How much intentional smashing is really going on? I dropped my 3G iPhone last month when I fumbled it while taking it out of my pocket. It hit the pavement end up, smack on the upper right hand edge... which is a real sweet-spot when it comes to shattering th

No glass? Are you crazy? It's one of the defining features that makes that phone such a joy to use. I say that even though the screen on my first iphone spontaneously cracked while just sitting in my pocket. My 3G replacement has lasted for a couple years though.

This is all just a result of cell phone prices being outrageous to begin with. People wouldn't bother with insurance fraud to replace their phones if it wasn't going to cost them $500+ without renewing their plan. I mean without insurance all it takes is falling in the pool to set you back a few hundred dollars. With insurance you get taken for the same ride, just over time. And most companies won't let you have insurance without a contract agreement.

As far as I can tell this is standard operating procedure for insurance companies.

They'll happily take your money in exchange for 'insurance' for X. They get your money, you get peace of mind, it's all hearts and flowers.

It's just that if at some point you want them to follow through on their end of the deal... Well, then you're obviously a cheating, swindling bastard bilking them out of their money. Any excuse to deny a claim; if they can't manage that often enough they'll lobby for changes in laws to make it easier to do in the future.

The nerve of some people, expecting insurance companies to pay up when they make a claim.

Moral hazard is part of the insurance business- hire some people who are better at math so you can price your insurance product accordingly.

Ideally, insurance works best when everyone pays into it and their claims are valid. It's a waste of time and money to have dishonest people. You don't like your two year contract with your cell phone company, save your insurance money under your mattress and buy the phone when you want it. False insurance claims break the system -- it's a form of cheating. Not everyone does it, but because some people do it, every claim has to be verified. It's difficult with handsets and not often worth the time sinc

If everyone played within the relatively simple rules, insurance would be cheaper, as would the services and products it's defending.

No.

No, it would not.

The rates set for insurance are set to maximize profits for the insurance company.

As the price increases, fewer people will purchase it. If it increases enough, few enough people will purchase it that overall profit goes down. Right before that price point is the sweet spot they try to hit. That spot has nothing to do with any costs to the insurance company, including potential fraud.

Besides all of which, the monthly price, plus the deductible, are most likely high enough that even if every single person who had the insurance smashed their phone and demanded an upgrade when a new one came out, they'd still make a profit.

I'm surprised the "suspicious" percentage is so low, actually. If the insurance company is saying two-thirds of all claims are suspicious, that means that one-third of the time they can think of no way at all the damage could have been intentional.

Clearly, you are not an actuary or even remotely close to one. What you describe is what many misguided consumers of insurance contracts believe is the mechanism of insurance pricing.

Insurance is very tightly regulated. All rate filings must be approved by the appropriate state regulators, and there are standardized procedures in place to calculate rates. It is also a very competitive industry. If what you claim were actually true, it would be trivial for a competitor to offer a lower rate for the same

It's just that if at some point you want them to follow through on their end of the deal... Well, then you're obviously a cheating, swindling bastard bilking them out of their money. [...] Moral hazard is part of the insurance business- hire some people who are better at math so you can price your insurance product accordingly.

Sure, I agree. And they do price accordingly. They do price accordingly, they do screw you when claiming, they do whine when it's claim time and we don't have to listen to it, sure, sure, sure.

But still -- the deal is NOT that you break your device when a new model comes out. When all is said and done: we can say it's morally reprehensible.

When people decided that having a fire brigade was a bad idea because it meant that a bunch of guys depended on there being regular fires..... Or maybe not... in fact, it is nothing like that.. carry on...

If I knew a company was going to be releasing a new version of something I'd damaged, I might wait a bit before making a claim, so I could get the newer version of the replacement rather than the older version. A lot of technology can be coerced into sort of working for a little while longer by wiggling connectors or overlooking a cracked and flickering screen.

people have been doing this for years with best buy. get the extended warranty. drop it down a flight of stairs a month before it lapses, get a replacement. (refurb often, but not as worn anyway) They replace it almost regardless of treatment.

Tho this all falls under the name of "insurance fraud". There's no reason to be surprised that when a new model of anything comes out, that there won't be a short spat of insurance fraud by owners of the previous model. This article has nothing whatsoever to do sp

"iPhones, like most mobile phones, are actually very difficult to damage.

I don't have an iPhone, but I know for a FACT that it's damned easy to ruin a phone accidentally. My (now ex) wife dropped our new Star Tek in the coffee when we were travelling; bye bye Star Tek. I got caught in a thunderstorm at a George Thorogood concert at the Illinois State Fair; bye bye LG. I slipped on the ice and fell with my phone in the pocket I fell on; bye bye Nokia. Dropped my Razr in the toilet while trying to answer it when I was pissing; despite immediatekly removing the battery and washing it and drying it out, it was ruined, never to work again.

My daughter (who turns 23 next month) has broken a lot more phones than I have, but that's because she keeps it in her purse. Women are notoriously hard on purses, which are a lot more forgiving of abuse than their contents are.

Anybody who says it's hard to break a phone is either stupid or lying.

Imagine that. Who would have guessed that if you get water in a piece of electronic equipment, said equipment might be damaged. I am sure you use your hair drier, laptop, and radio while in the shower too.

The fact is that phones will generally survive a casual drop or incidental water contact with no damage. But, when you start submerging them or slamming them into the ground, you have moved from normal wear and tear into abuse.

I've personally had the same phone for 2.5 years, a Nokia flip phone. Paint's lookin pretty bad, but still tickin'. Seriously, what do you people do to your phones? Answering while pissing? WTF? Dumb, and rude.

Just buy them a used iPhone identical to the one they lost/broke. Hey that one was used, too. Or just reimburse them the used value. They can buy a used one on ebay and they will be right back where they started: with a used phone.

This is precisely what car insurance companies do, it's nothing new.

If you eliminate the possibility of someone making out on the deal then you will weed out the opportunists.

This has been going on since phone carriers began offering accidental damage insurance. Some people deliberately break their phone every year or two to get a free upgrade. And some people are genuinely rough or careless with their phones, and break them during normal use. Since they can't tell the difference, some carriers limit the frequency that you can claim on the insurance.

In the bottom of the article, they say "four in ten", not "four in six," so whoever wrote the headline made the mistake. "Four in ten" sounds more plausible, since it's more akin to a percentage (ie. 40%). I'm guessing whoever wrote the headline spaced it and pulled the "six" from the "six blows from a hammer" anecdote.

Hmm.. "cause of accident." (Types Superhuman alter ego resulting from bombardment of gamma radiation and adrenal rush. Frustrated with user interface. Smashed phone in rage.. Considers it for a moment. Deletes and types in Fell out of moving vehicle.)

I never buy insurance for my iPhones because I know that I'm going to want to upgrade them each year. It never occured to me to smash and replace. I wouldn't want to do that though. On the other hand, sell me a policy where each year I get to send in my old iPhone and get a new one and I'd be all over that. The insurer could then sell my old iPhone or use it to replace someone with cheaper insurance who didn't buy the upgrade option.